Use the Following to Answer Questions: Table: Market for Oil

question 222

Multiple Choice

Use the following to answer questions: Table: Market for Oil
Suppose that oil is produced by 10 countries, each of which produces 10 million barrels of oil a day (MBD) for a total 100 MBD. The world price of oil at this quantity is $36 per barrel so each country earns $360 million a day. $$\begin{array} { | c | c | } \hline \text { World Price (per barrel) } & \text { World Quantity (MBD) } \\\hline \$ 36 & 100 \\\hline 37.50 & 98 \\\hline 47.50 & 82 \\\hline 50 & 80 \\\hline\end{array}$$
-(Table: Market for Oil) Refer to the table. Suppose that these countries form a cartel and each country produces 8 MBD. If one of the cartel members cheats by secretly pushing its production back to 10 MBD rather than 8, total revenue for the noncheating countries would:

• A) decrease from $400 million to $380 million a day.
• B) decrease from $360 million to $288 million a day.
• C) increase from $400 million to $500 million a day.
• D) remain unchanged at $380 million a day.

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